Elliott Wave InternationalmyEWISocioniomics.Net
Home > Stocks
Bubble, Bubble: Stocks in Trouble?
400 years of history show: AFTER a mania, prices fall lower than they were BEFORE it
By Bob Stokes
Wed, 21 Mar 2012 16:00:00 ET
Add to Facebook Add to Twitter Email to a friend Printer Friendly Get the RSS feed Add to more social media services
Get investable insights sent to your inbox at least once a week – for free. Challenge the way you think about investing with The EWI Independent. Privacy

If history shows anything, it's that financial bubbles end badly.
 
In fact, having scrutinized that history for years, our own research indicates that some very recent asset bubbles have only started to deflate.
 
Even so, many investors may think, "Why, I can still get out long before the worst part of the collapse." Thoughts like this are part of history as well -- including people who walked home to bare cupboards in Holland in 1637. (Note the word END* in the lower right of this chart.)
 
 
 
In the tulip mania of the 1630s in Holland, tulips went from 20 cents to 60 florens -- and then crashed to 2 cents. Now, if someone said at 30 florens on the way up, 'This is ridiculous. A crash is coming. Don't play the game.' And someone else said, 'I think they could go to 40 or 50' -- does that mean you want to own tulips just in case they go higher? I think it's playing with fire...
Robert Prechter, October 2004 interview
 
It's easy to say you'll get out before the bubble bursts -- but there's always someone saying "stocks have more to run," or "this pullback is healthy for stocks"... in other words, "tulips are headed even higher."
 
A similar market sentiment was expressed in this March 21 CNBC headline:
 
"Stocks Offer Best Opportunity of a Lifetime: Goldman Sachs"
 
That headline represents many other recent financial headlines. And it comes after the rally has persisted for three years, the S&P 500 has more than doubled and rally leader Apple has risen seven-fold.
 
Moreover, it implies that now is an even better time to buy stocks than 1982, the start of the big bull market.
 
The bubble mind-set is alive and well.
 
Our three times a week Short Term Update shows technical indicators that are well worth your consideration especially if you're on the fence. 

You owe it to yourself to take a look at our latest Short Term Update. It's risk-free>>

 


Here's what you can have on your computer screen in moments:

1. Short Term Update (Mon, Wed, Fri)
You get latest forecasts 3 times a week, after the close.
 
2. Elliott Wave Financial Forecast (Monthly)
Tracks intermediate-term patterns in U.S. markets.
 
3. Elliott Wave Theorist (Monthly)
Prechter's cutting-edge view into when, where, and why the waves are unfolding.
 
Plus, Subscriber-Only Extras -- FREE
Advanced Elliott wave tutorial, classic EWI reports, market update videos, Message Board Q&As, educational tools, and more. Best of all, it's completely free. 

Tags: Bear market, CNBC, deflation, herding, history, mania, market crash, Robert Prechter, sentiment, stock indexes, technical indicators
Rating: - based on [46 rating(s)]
Rate this content:
  
 
EWI's Event Calendar
May 13-16     

Las Vegas Money Show

July 10-13       

Freedom Fest Conference




FFSEWI's Financial Forecast Service equips you to think, trade and invest independently from the crowd. Here's what you'll get, risk-free:
  • Short Term Update -- Intensive forecasts and analysis 3x/week for U.S. stocks, gold, silver, bonds and the U.S. dollar.
  • Financial Forecast -- In-depth, intermediate-term perspective on U.S. stocks, gold, silver, bonds and the U.S. dollar.
  • Theorist -- Bob Prechter's monthly big-picture insights.
Put the Financial Forecast Service on your screen in minutes, risk-free>>
Free Video Course
Learn the Why, What and How of Elliott Wave Analysis

Financial media use news and economic events to explain market moves. Steer clear of this misguided approach. Take part in the Elliott Wave Crash Course to learn what really moves the markets.


© 2013 Elliott Wave International

The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.